Question

What are nonfinancial measures of performance? Provide several examples.

Answer 1

Non financial measures of performance are qualittative measures of performance which cannot be expressed in terms of monetary value. The importance of non financial measures is equivalent to financial measures when it comes to decision making and assessing the market position of the organization.

The examples of non financial measures of performance are as follows:

Brand Preference:

​​This measure helps you understand whether the customer prefers your product over competitors. For example, "Apple" is the preferred brand among smart phone users.

Customer Retention and churn:

​​Acquring customers and taking appropriate measures to retain them is very important for companies to maintain their market position. If the company is acquiring customers, but the exisiting customers are exiting the company, it can prove to be detrimental to the company. For example, Telecom companies frequently monitor subscriber churn to stay competitive.

Customer Experience:

​Whether the customer is getting a superior experience or what is termed " value for money" is an extremely important measure. For example, Starbucks will refund a customer's money or exchange the coffee if the customer says its not up to the mark as customer experience is of utmost importance to them.

Innovation:

​Constant reinvention is the key to long term success. Only by constant improvement, can the companies stay at par with the changing market.For example, cosmetic companies constantly launch new products as per changing fads.